Stocks went down anyway. People know the AI bubble is gonna pop.
Yeah and private credit too. Operating behind closed doors without much regulation. And securitized subprime auto loans masquerading as high yield bonds.
Remember in the film Margin Call when Jeremy Irons' character (apparently based on the real life CEO of the eventually failed investment bank Lehman Bros) says about the game of musical chairs that "Right now, I don't hear... anything."
Next thing he does is sell every mortgage based asset his traders can unload on unsuspecting Wall St colleagues.
He's first out, and savvy, but it wasn't good enough. It set the stage for the global financial crash.
We're not quite there yet again, and "some say" the next downturn can't be as bad... but Bloomberg's arrays of articles lately offer various fadeaway hints that once again it's almost time to short practically everything.
Don't forget most of the post-2007 financial guardrails have been chipped away at by the banks and fintech industry for at least 10 years. Private credit dependencies are pretty opaque. No one really knows how the hedging of their debts and securitizations may overlap, offset or reinforce each other. The recent collapse of a couple of companies where fraudulent receivables were used as collateral for multiple lenders was another warning sign the street is trying to shake off (or, disentangle itself from with respect to their own and other balance sheets).
I mentioned some of this to a friend recently, someone of nearly my age. He laughed ruefully and said yeah the one good thing about our grandkids and great grandkids is that they mostly all have gig jobs and so no money in the market... "what a country, eh?"
Also three big banks just took a second look at their prior commitment to help Trump support Milei's Argentine mess, and reneged on their earlier pledge to loan $20 billion, now saying they're going to set up a $5 billion kind of repo lending arrangement instead, since they can read the room and now know Trump's government won't keep a promise to bail them out. Even their $5 billion gig has details "to be arranged."
Meanwhile after rate cuts the banks have actually jacked rather than reduced the APRs on a lot of credit cards. If you don't carry a balance then who cares, right? But if you call them up anyway and demand an explanation, a new one I'd never heard before is "well we set the card rate on group experience so a individual's personal credit rating and payment history may not reflect average experience." Hmm? Say what? So what good is a great FICO score, an excellent credit rating, etc. etc., one might wonder, since your neighbor down the way with a subprime rating is who represents the customer the bank is still willing to issue a credit card to, en masse no less, in order to have subprime debt to feed to its ravenous securitizing department and so move that soon-to-be-bad debt off its books.
The end may not be near, there's always another round of this stuff once a crash occurs and the surviving banks get up off the mat and look around to see what else they can help exploit before it's time to load up the planes and head to some high desert plateau behind walls they all hope they can build high enough to stave off peasants with pitchforks. Used to be the Caymans etc., but climate change suggests islands are becoming a dicey hangout for offshore wealth. 🙄
